CPA accused of insider trading

A certified public accountant (CPA) has admitted he conducted insider trading using confidential information obtained on two companies he was auditing, his former employer said Monday.

The man in his 30s, whose name is being withheld, used information not available to the public between February 2006 and April 2007 while he was working for Japan's largest auditing firm, Ernst & Young ShinNihon, the company said.

The CPA, who quit the Tokyo-based firm at the end of June 2007 apparently to open his own office, said he traded shares of the two companies to make up for losses suffered in other stock deals, the company said.

The Securities and Exchange Surveillance Commission (SESC) is investigating the case and plans to ask the Financial Services Agency (FSA) to fine the CPA, other sources said. It would be the first time for a CPA to be fined for insider trading.

"The (insider trading) case damaged the basis of the auditing system," Toshio Mizushima, head of Ernst & Young ShinNihon, said at a news conference Monday. "We apologize for causing trouble to those concerned with stock markets."

According to the auditing firm, the CPA bought 300 shares of a company in February 2006 under the name of a female acquaintance based on information about the company's financial situation he obtained in the course of auditing that company.

Within a month, he sold the shares, but still lost about 3 million yen because of turmoil in the market.

From March to April 2007, he bought and sold 261 shares of a different company that he was auditing, and made about 350,000 yen in profits.

Ernst & Young ShinNihon last month was asked by SESC for cooperation with the investigation.

The auditing firm plans to set up its own investigation committee to prevent a recurrence. The committee, which will consist of third-party persons, will be headed by Nobuo Gohara, a professor of law at Toin University of Yokohama.

In the past few years, scandals have raised doubts about the integrity of the auditing system in this country.

In 2006, three CPAs who were formerly with ChuoAoyama PricewaterhouseCoopers were found guilty of helping cosmetics and textile maker Kanebo Ltd. window dress its financial statements to conceal deficits.

Also in 2006, two CPAs of now-dissolved auditing house Koyo & Co., who were in charge of auditing Livedoor Co., were indicted on charges of conspiring to window dress the financial statements of the Internet service company.

In 2007, three accountants had their certifications revoked due to their involvement in the falsification of financial statements of telecommunication works company TTG Holdings.(IHT/Asahi: March 4,2008)